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Estimated Tax & Penalties

Discussion in 'Investing' started by The Brontide, Aug 5, 2020.

  1. The Brontide

    The Brontide Active Member

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    Ah the beloved IRS.

    So, you may be having a great year, maybe not.

    But if you are doing well with post tax monies invested, beware.

    To avoid paying in even more under the heading of penalties, pre-pay your dagum taxes.

    Why give the IRS extra out of your winnin's.

    https://www.irs.gov/businesses/small-businesses-self-employed/estimated-taxes

    Post yay! If you don't have to worry about it. IE: you didn't clean up.

    Post Boo! If you know you gonna owe big time!
     
  2. The Brontide

    The Brontide Active Member

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    Oh, and yes, for me,...

    Booo!
     
  3. WXYZ

    WXYZ Well-Known Member

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    I always owe and NEVER make quarterly payments. I usually make the 4th quarter payment January 15th and the balance with my return on April 15. Other than that.......I SKIP the other 3 estimates. The penalty is not very significant. Usually between about $350 and $900. I prefer to have the use of my money over the year and USUALLY make more on that money by having it invested compared to the penalty owed.

    I will use REAL numbers to illustrate. For 2019.....I paid a 4th quarter estimate, January 15 of 2020, of $16,000. On April (delayed to July) 15, I paid the balance for 2019, $31,000. I paid NO other estimates........1st qtr, 2nd qtr, 3rd qtr. This was a high tax year for me so the penalty was a bit higher.....about $1000. I am sure I made more than that by keeping that $16,000 invested for 3/4 of the year and that last $31,000 invested all year. In other words I was willing to take the gamble that i could make more than the amount that the penalty represents, on my money, AND I prefer to hold onto my own funds till the last minute.

    Now with my income annuities...........next April........my taxes will be cut by about 2/3 to 3/4.
     
    T0rm3nted and The Brontide like this.
  4. The Brontide

    The Brontide Active Member

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    @WXYZ

    I like what you said. It does provide a decent option, of course assuming you make enough profits off that 600-900 dollars to pony up the bill.

    Myself, and I imagine many others out there, do not have that option. Legal reasons. I have to maintain an above-board relationship with my finances.
     
  5. WXYZ

    WXYZ Well-Known Member

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    In a MORE typical year the penalty that I pay is about $350. I dont know what my income is going to be till the end of each year.
     
  6. The Brontide

    The Brontide Active Member

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    I agree. No trader, especially with multiple revenue streams, can accurately predict yearly income.

    If you are a business owner, for example, you know how pissy the feds get when you fail to report your quarterlies.

    In my case, if I overpay my estimated quarterlies, then I just roll it over to the following year tax expectations.

    I am a tightwad with my money, the fed gets enough of it already, so an extra few hundred saved from penalties, is a couple three more for investments, or taking the wife to Teppanyaki's for sushi and filet a few times. (On hold until life is safer out there)
     

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